Gold, silver prices crash: what’s behind the sudden selloff?
Gold and silver prices crashed in a dramatic and highly volatile session, catching traders off guard just a day after both metals hit record highs. The sharp reversal wasn’t driven by a single trigger. Instead, a mix of aggressive profit booking, a rebound in the US dollar, and renewed uncertainty around US monetary policy combined to spark one of the steepest single-day declines in recent years.
So why did gold and silver prices crash after such a powerful rally? The short answer: markets moved too far, too fast—and traders rushed to lock in profits.
On India’s Multi Commodity Exchange (MCX), gold futures expiring on February 5, 2026 fell as much as ₹11,000, or nearly 6.5%, settling around ₹1,59,984 per 10 grams. Silver saw an even more brutal slide. March 5, 2026 silver contracts plunged ₹68,000, or about 16.6%, ending the session at ₹3,34,503 per kg and slipping below the closely watched ₹3.5 lakh mark.
This sharp fall followed an extraordinary rally the previous day. Silver had surged to an all-time high of ₹4,20,048 per kg, while gold had touched ₹1,80,779 per 10 grams. Such rapid gains often leave markets vulnerable—and Friday’s action confirmed that risk.
Profit booking, dollar rebound trigger gold, silver price crash
Market experts point to aggressive profit-taking as the primary reason gold and silver prices crashed. After prices surged to uncharted territory, traders chose to cash out rather than chase higher levels.
According to Manav Modi of Motilal Oswal Financial Services, the rebound in the US dollar played a crucial role. The dollar index bounced back from recent lows near 96, making dollar-denominated assets like gold less attractive. At the same time, the USD/INR pair touched record highs, adding pressure on domestic bullion prices.
International markets reflected the same trend. Comex gold slipped over 2% to around $5,236 per ounce after falling sharply from its peak. Spot silver also corrected heavily after failing to hold record levels.
This sudden shift in sentiment highlights a key truth about precious metals: when prices become overextended, even strong long-term narratives can take a back seat to short-term profit booking.
ETFs tumble as gold, silver prices crash
The impact of the selloff wasn’t limited to futures markets. Gold and silver ETFs also took a beating, with several funds plunging by double digits in a single session.
Silver-focused ETFs led the decline. Zerodha Silver ETF and SBI Silver ETF dropped around 14%, while Nippon India Silver ETF also slid 14%. Kotak Silver ETF wasn’t far behind, declining nearly 12%. Gold ETFs weren’t spared either. Nippon India Gold ETF fell close to 10%, while ICICI Prudential Gold ETF slipped about 6%.
Why did ETFs fall so sharply? Many investors who rode January’s explosive rally opted to exit quickly once prices started falling, accelerating the downside. With silver up more than 50% in January and gold posting its strongest monthly gain since 1980 in dollar terms, the temptation to book profits was simply too strong.
Fed uncertainty adds fuel to volatility
Another major factor behind why gold and silver prices crashed is rising uncertainty around US monetary policy. Markets were rattled after US President Donald Trump said he would soon announce his choice to replace Federal Reserve Chair Jerome Powell. Reports suggesting former Fed governor Kevin Warsh as a potential candidate spooked investors, as he is seen as less dovish.
A potentially more hawkish Fed chair could mean tighter monetary conditions, which typically weigh on non-yielding assets like gold and silver. As expectations shifted, traders rapidly reassessed their positions.
KCM Chief Market Analyst Tim Waterer summed it up well, noting that a less accommodative Fed outlook, combined with a stronger dollar and overbought conditions, created the perfect storm for a sharp correction.
Is this the end of the rally or just a healthy correction?
Despite the brutal session where gold and silver prices crashed, many analysts believe the broader trend remains intact—though volatility is here to stay.
Gold is still on track for its best monthly performance in decades, while silver is set for its ninth consecutive monthly gain. Jigar Trivedi of IndusInd Securities noted that silver’s rally has been supported by tight physical supply and record investment and industrial demand.
At the same time, the World Gold Council has flagged potential headwinds. High prices could dampen jewellery demand in key markets like India, and central bank buying slowed in the final quarter of 2025. However, strong investor interest continues to offset some of these concerns.
Adding to the drama, a widely shared market commentary pointed out that gold’s volatility has reached “2008-crisis levels,” with trillions of dollars in market value swinging within hours. That comparison alone underscores how extraordinary current price action has become.
What should investors watch next?
Looking ahead, traders are closely tracking upcoming US economic data, especially inflation indicators like the Producer Price Index, for clues on future rate decisions. Any shift in the Fed’s stance could quickly reignite—or further cool—precious metals.
Major global banks such as UBS, Deutsche Bank and Societe Generale remain bullish on gold over the long term, citing safe-haven demand, geopolitical risks and diversification needs. Silver’s outlook is more divided, with some expecting further upside from structural shortages, while others warn of sharp pullbacks if speculative positions unwind.
One thing, however, is clear. Even after this dramatic episode where gold and silver prices crashed, volatility is likely to remain the defining theme. For investors, the message is simple: precious metals still offer long-term value, but the road ahead will be anything but smooth.
